A cluster of star industries

BEIJING, China –There is excitement in the air here in Beijing. It is not because of the bright lights on the grand avenues, the signs everywhere announcing the 2008 Olympics, or the crowds and street music playing Kenny G on Wang Fujing Road. It is, I feel, caused by the clear sense of purpose that seems to propel government, business and the people towards specific goals.

Hard to compete with someone who knows where he is going. Emmett Thomas, president of Asia Pacific Monitor Company, in an Asia Society talk sponsored by Nonoy Colayco explained how. Emmett advises companies and countries all over the world to transcend competitiveness that is "factor driven" (when, for example, there is low labor costs, or a unique product); "investment driven" (when, for example, massive capital creates hard to beat economies of scale); or, "innovation driven" (when, for example, there is leadership in knowledge and technology like patents). Instead, he espouses a transformation that strengthens competitiveness through the creation of "industry clusters" for potential "winners."

He cites the very successful Italian shoe industry as an example of how a well-organized cluster ensures a level of competitiveness that is hard to beat. Italy’s competitiveness is not dependent on any one factor but on the synergy created when each element of the cluster works towards and supports a common interest. The academe is focused. There are schools that teach about leather, shoe manufacturing and design. There are apprenticeship programs and awards that honor shoemaking as a craft. Creativity is supported so much that shoe designers all over the world make frequent treks to Italy to scout for the design trend that may just succeed. Committees decide on colors that Italian leather finishers produce. Since these leather finishers are located within miles of shoe manufacturers, the response time for orders made at shoe fairs is quicker than any other competitor can possibly achieve. The industry – including banking, logistics, government and other support services – is united in promoting Italian footwear, supported by massive media perpetuating the aura of sophistication. Unlike other shoe manufacturing countries that are a heartbeat away, the "cluster" allows Italy to be the heartbeat of the shoe industry.

In a sense, we have, as a country, been guided by the principle of clustering. President Ramos identified a few winning industries that were selected to "pole vault" to success. We have the IT cluster, the Electronics and, hopefully, the Maritime cluster. However, Emmett points out that a successful "cluster" cannot be very all-encompassing and must be very specific and focused such as the "Honey Bee Cluster" he worked on for a South American country. The IT cluster, for example, could be broken down into smaller components such as the "Call Center Cluster" or "Medical Transcription Cluster."

I see now how Singapore was able to claim being the cruise center of Asia. Even before a single cruise company committed its route in Southeast Asia, Singapore formed what in retrospect was a "Cruise Ship Cluster." The port developed a simple cruise terminal. The airport set aside a special receiving area that could accommodate the hundreds of tourists that arrive at one time to join a cruise ship. Singapore Airlines developed travel packages and offered these to cruise lines. The Singapore Tourism Authority launched a promotions and media campaign.

One winning industry that must immediately cluster is the Filipino seafaring industry, which contributes about US$1 billion yearly. Today, the Philippines is the dominant supplier of seafarers comprising the manpower on 20 percent of the world’s fleet with over 200,000 officers, ratings and specialized crew. This means that millions of people benefit from the inward remittance of 80 percent of their wages through home allotments. Our seafarers earn well and are respected. This is something we can be proud of. There is a developed academe through maritime colleges and training centers. Domestic and Filipino overseas shipping companies play an important role in providing cadet training. There is a system in place, both internationally and locally, that imposes and audits quality and safety standards. There is a system in place that puts order to recruitment. We have in front of us the challenge to put teeth into our ability to compete. The cluster would allow us to harness every stakeholder’s energies towards maintaining our dominant position and strategizing what it takes to expand it. The synergy created would help us identify how we can add value to our services and distance us from our competition.

The lack of intent to consolidate our efforts makes us extremely vulnerable to competition, even in its simplest form. Sitting here in China and witnessing the vibrancy of its people and their intent to succeed makes me all the more convinced that we must act urgently. We need to gather our minds, hearts and intentions – in whatever specific industry we are involved with and work towards developing industry clusters. Emmett points out that the most successful clusters are led by businesspersons through industry associations, who work with government agencies as "enablers." Competition from outside our shores may just be the motivation, and clustering may just be the methodology we need to constructively work together.

* * *

I appreciate your comments at dorisho@attglobal.net... For more information about Asia Society membership and programs, please call 752-43-74.